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Current Market Outlook


If you haven’t stuck with a proven system in 2015, chances are you’ve been chopped to pieces by the market’s never-ending ups and downs. Today was another headline-driven selloff (Chinese stocks are seeing renewed weakness), but it doesn’t change the market’s condition—the intermediate-term trend is still sideways, with some stocks acting fine and others looking like it’s 2008. The plan remains the same—be selective on the buy side, honor all stops and hold some cash, but also give your most resilient stocks a chance to hold up and resume their advances. If leading stocks decisively break down, then we’ll change our tune, but so far focusing on the strongest stocks has been fruitful.

This week’s list features a few recent earnings winners, as well as a few that are set up well heading into their earnings reports. Our Top Pick is Valeant Pharmaceuticals (VRX), a big-cap growth stock that remains in a firm uptrend following a better-than-expected report.

Stock Name	Price	Buy Range	Loss Limit
Valeant Pharmaceuticals (VRX)	0.00	248-256	230-232
Netflix, Inc. (NFLX)	423.92	101-106	93-94.5
Infinera (INFN)	0.00	22.5-23.5	20-21
IACI (IACI)	0.00	78.5-81	75-76
GoPro, Inc. (GPRO)	0.00	59-62	54-55
Criteo (CRTO)	0.00	51-53	48-49
Chipotle Mexican Grill (CMG)	773.32	705-720	660-665
Cempra (CEMP)	0.00	42-44	37-38
China Biologic Products (CBPO)	0.00	112-117	105-106
Amazon.com (AMZN)	2.00	515-530	470-475

Uber stock has not been a good investment since coming public more than a year ago. Will its new acquisition of Postmates change its fortunes?

Buying aggressive stocks can help you outperform the market and lead to a richer retirement, but it’s got its risks and you need to know the pros and cons before you dive in.

The market’s evidence has worsened of late, with our Cabot Tides flipping to bearish earlier this week, and going along with that is a dearth of stocks hitting new highs. To be fair, it’s not all bad news — we’re seeing fresher leadership hold up relatively well, even during this latest decline, while the longer-term signposts are still positive — but we continue to think a relatively cautious stance is appropriate. Since the last issue, we’ve had a couple sells and three buys (repositioning the portfolio into some more resilient names), but we’re still holding onto about 44% in cash.

In tonight’s issue, we go over all our positions (including the new buys, which we think are battling for pole position for the market’s next advance) and talk about one simple chart tool that can help you spot other potential leaders going forward, too.

The post-Labor Day selling was worrisome, suggesting the correction that began in mid-July (for the big-cap indexes) or March (for the broad market) was still ongoing. And, frankly, we continue to think that—from a top-down perspective, the market is still mostly working through a consolidation, and safer measures are outperforming (a sign big investors are hesitant). That said, there’s no doubt the action among individual stocks remains mostly encouraging: Last week saw tons of beefy action, with many roaring right back to (or out to) new high ground as soon as the pressure came off the indexes. We’re going to nudge our Market Monitor up a level 7, though our general advice (small new positions, hold some cash) still holds.

This week’s list again has many familiar names from a range of sectors, a sign that the underlying resilience is persisting and broadening a bit. Our Top Pick has a great-looking launching pad—as with many names, it hasn’t broken out yet, so either start small here and use a loose leash and/or aim to buy on a decisive breakout.

Outside of a few mega-cap names, the market remains stuck in neutral, with the vast majority of stocks (including growth stocks), sectors and indexes meandering sideways, resulting in plenty of trendless, tedious action. Of course, many areas are within shouting distance of new high ground, so we’re not negative--but while we’d love to put some money to work (a couple of names on our watch list are fairly enticing), we think less is essentially more, at least until the market shows its hand. We’re again standing pat tonight, though remaining flexible for what may come.

Long-term, the market’s picture remains bright, with our most reliable indicator (Cabot Trend Lines) firmly positive, which we write more about in today’s issue, as well as one name that’s probably at the very top of our watch list. All in all, we’re ready to make some moves, but right now, patience is the best course.

As has been the case for the past decade, the fate of cannabis stocks lies largely in the hands of politicians.

Cannabis companies have been getting solid support from state-level politicians. Forty states now allow sales of medical cannabis.

Sure, they are permitting too many stores, and that is putting downward pressure on pricing. At some point, the market sorts that out. Prices will fall to a point where it is no longer that enticing to bring on new supply, yet companies will have gotten lean enough to produce profits. We are not there yet. But we will get there.

This weekly update takes a look at how to handle bond investments when interest rates are rising. Bond prices and interest rates work like a seesaw: when interest rates rise, bond prices fall, and vice versa.

Shares of Docebo (DCBO) opened lower this morning after the company delivered a Q1 beat after the close yesterday but lowered full-year guidance.

From a top-down perspective, the market’s action over the past few weeks is about as good as you could have hoped for -- our Cabot Tides, Two-Second Indicator and Aggression Index have turned positive, and combined with the negative sentiment and blastoff-type indicators, we think the path of least resistance has turned up and solid gains are likely, at least when looking out many months.

The holdup is growth stock leadership, which has been tricky to this point, with many strong stocks getting hit while beaten-down names rally. That situation has improved some this week, but we want to see more fresh leadership kick off in the weeks ahead.

Still, we’ve reacted to the improvement in the evidence by making a few moves, some on the sell side (kicking out laggards), but a bunch on the buy side -- we still have 55% cash and are hoping to put some of that work if and as new leaders emerge. We review all our thoughts and some names we’re watching closely for purchase in tonight’s issue.

Oil prices and shares of oil-related stocks surged this morning after a terrorist attack on Saudi Arabian oil fields shut down about half of Saudi Arabia’s daily oil output.

Note: Due to the Thanksgiving holiday, the Cabot Turnaround Letter weekly update won’t be published on Friday. Instead, the next update and the Catalyst Report will be sent out on December 5.

Given the obvious risks of the current macroeconomic environment (inflation, geopolitical volatility, etc.), it’s my contention that sector selectivity has never been more important. That is, when evaluating stocks for potential purchase, it’s imperative that we consider the potential impact the macro climate might have on said investment going forward.

Goodyear Tire & Rubber (GT) is no stranger to veteran subscribers of the Cabot Turnaround Letter. The stock was initially recommended in 2022 and was a long-time holding in the portfolio. I made the decision to sell the stock when I took over as chief analyst last summer, which at the time seemed like a good idea.

Indeed, the stock had been underperforming for quite some time, and management had just warned of “weaker underlying trends in the industry” for the second half of 2024, augmented by lower tire volume and higher costs. The stock dropped 16% to a new 52-week low at that time (early August) and was threatening to break a benchmark “support” level in its long-term chart, while the firm’s debt remained disturbingly high.

EverQuote (EVER) and RxSight (RXST) Deliver; FTAI Infrastructure (FIP) Still a Buy

Recent market volatility has sparked a rash of insider buying. But not all insider buys are created equal. Here’s how to identify the ones that matter.

In the January issue of Cabot Early Opportunities, we take heed of the improving market breadth and dig into five companies from different industries that look compelling now.

Our top pick this month is a small-cap oil and gas equipment company that’s a leader in the offshore market. I also feature an online retailer specializing in the luxury market, an emerging MedTech name, a customer experience specialist and an online learning marketplace that’s poised to recover nicely.

As always, there should be something for everyone in this month’s issue!

Back on August 28 after the close, I shared bullish commentary on the cannabis group which was melting down at the time.

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